A Minor Delay, Part II: Hello, Sam!
Posting will be slim and none this week following the birth yesterday of my son, Samuel Armstrong Carton! Welcome to the world, Sam!
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April 19, 2005 |
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New Cottage Industry: Court Actors
Kudos to Shawn Young of the WSJ for finding this original angle to report on in the WorldCom case--the professional actors hired by plaintiffs' counsel to "perform" lines of prior testimony from witnesses who took the Fifth and refused to testify at the civil trial.
The job of reading prior testimony into the record from unavailable witnesses is routinely handled by the lawyers in the case. However, because such testimony (and the lawyers who read it) can be quite dry, the article notes that some lawyers are now turning this task over to professional actors in order to "breathe life" into the testimony.
Enter actors like Neil Intraub, who has been acting for 25 years and
can currently be seen playing the father of a tech-savvy 16-year-old in a TV spot for Comcast Corp. He does voice-overs for commercials and readings at Manhattan's Cornelia Street Cafe, a short distance from his apartment in the East Village. With a partner, he performs Laurel and Hardy-inspired comedies at colleges and theaters.
Intraub reportedly jumped at the chance to play his first villain--Scott Sullivan--and rehearsed twice with plaintiffs' counsel for this "off-Broadway drama with a captive audience -- the jury at a civil trial in Manhattan federal court." He was paid $1,000.
The article notes that Intraub didn't let his lack of financial knowledge get in the way of a good performance:
"WorldCom Group Ebitda was $2 billion, vs. $2.3 billion in the year-ago period," he said smoothly during his performance.
"What is Ebitda?" he asked afterward, wondering whether he had pronounced correctly the Wall Street shorthand for earnings before interest, taxes, depreciation and amortization.
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April 15, 2005 |
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Pop Quiz on Reg FD
Please put all books and papers under your desks. We are having a pop quiz on Reg FD, courtesy of the Wall Street Journal. Click here to take the quiz.
Full disclosure: SLW missed question 3. Our 4 out of 5 performance still earned us the following pat on the head from the WSJ:
"News Hound. You clearly read a lot of newspaper coverage on the SEC. Your company should steer clear of trouble."
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April 14, 2005 |
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SEC Enforcement Director Cutler Stepping Down
The Washington Post reports that after 3 and a half years as Director of the SEC's Division of Enforcement, Stephen Cutler will be resigning in mid-May to return to private practice. No successor has been named yet. The WSJ has this interesting video interview with Cutler and CNBC's Maria Bartiroma discussing his departure.
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April 13, 2005 |
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Kerkorian-DaimlerChrysler Update VII: Charities Receive Total Consciousness
Our eyes were moist as we read this article from the Las Vegas Sun. According to Kerkorian's attorney, if Kerkorian had prevailed in his billion-dollar claim against DaimlerChrysler, he planned to give the money to charity. His defeat, however, apparently means that the charities, like Kerkorian, will receive only total consciousness as a result of the case.
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April 11, 2005 |
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Kerkorian-DaimlerChrysler Update VI: Kerkorian Receives Total Consciousness
Caddyshack (1980)
Carl Spackler: So I jump ship in Hong Kong and make my way over to Tibet, and I get on as a looper at a course over in the Himalayas. A looper, you know, a caddy, a looper, a jock. So, I tell them I'm a pro jock, and who do you think they give me? The Dalai Lama, himself. Twelfth son of the Lama. The flowing robes, the grace, bald... striking. So, I'm on the first tee with him. I give him the driver. He hauls off and whacks one - big hitter, the Lama - long, into a ten-thousand foot crevasse, right at the base of this glacier. Do you know what the Lama says? Gunga galunga... gunga, gunga-galunga. So we finish the eighteenth and he's gonna stiff me. And I say, "Hey, Lama, hey, how about a little something, you know, for the effort, you know." And he says, "Oh, uh, there won't be any money, but when you die, on your deathbed, you will receive total consciousness." So I got that goin' for me, which is nice.
Back in 2003-2004, we followed the Kerkorian-DaimlerChrysler lawsuit for months, from the Seventh Circle of Document Review Hell to the post-trial festivities. Then, for over a year, we waited in vain by the Business Wire to learn the Court's ruling. Finally giving in to the reality that "a watched Business Wire never boils," we reluctantly agreed to leave our post momentarily for needed medical attention, and awoke from general anesthesia to learn that it was all over: the AP reports that on Thursday, Judge Farnan ruled in DaimlerChrysler's favor, rejecting Kerkorian's $1 billion claim that DaimlerChrysler falsely labeled it's combination with Chrysler Corp. as a "merger of equals."
An attorney for Kerkorian reportedly acknowledged that Kerkorian's company Tracinda was "clearly disappointed" with the judgment, but added that "we are pleased that other DaimlerChrysler shareholders who followed Tracinda's lead and filed lawsuits based on our exact claims and key discovery were successful in reaching a settlement with DaimlerChrysler." In other words, "total consciousness" for Kerkorian.
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April 8, 2005 |
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A Minor Delay
"Minor surgery is when they do the operation on someone else, not you." -- Bill Walton
Following "minor" knee surgery #2 (relative to this one), SLW will be taking a brief hiatus. The blogging will resume when morale improves. Which should be soon, I hope.
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April 5, 2005 |
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WorldCom 360°
The following article appeared in the April 2005 edition of ISS' SCAS Alert:
WorldCom 360°
By Bruce Carton, VP and Executive Director
The final days of winter 2005 appear to have been the crescendo of nearly three years of fallout from the financial fraud at WorldCom Inc. that first came to light in June 2002. On March 15, former CEO Bernie Ebbers was found guilty by a jury of nine counts relating to the accounting fraud at WorldCom. He now faces up to 85 years in prison and is to be sentenced on June 13.
In addition, J.P. Morgan's agreement on March 16 to settle the claims against it in the WorldCom securities class action for $2 billion capped a whirlwind two-week period in which 13 banks and all 12 former WorldCom directors named as defendants in that case settled for a combined $3.486 billion. When this is combined with the $2.575 billion settlement with co-defendant Citigroup that was announced May 10, 2004, the total settlement fund in WorldCom securities class action now stands at a staggering $6.061 billion. [See this chart for a breakdown of these settlements.]
Although there are still a few loose ends, here is a 360-degree view of the WorldCom legal landscape as it heads toward closure.
Criminal Charges
With the jury verdict in the Ebbers trial, the federal criminal prosecutions of WorldCom executives appear to be completed. In addition to the Ebbers verdict, five other executives, including the company's former CFO, Controller and Accounting Director, previously pleaded guilty to charges of securities fraud and each faces a sentence ranging from probation to between 15 and 25 years in prison.
It is unclear what will become of any remaining state criminal prosecutions against WorldCom executives. In August 2003, the state of Oklahoma filed felony charges against Ebbers and former CFO Scott Sullivan, which were later dismissed pending the conclusion of the federal case. After Ebbers was convicted, Oklahoma's Attorney General stated that he intended to re-file these state fraud charges but offer concurrent sentences to Ebbers, Sullivan and possibly others on the state fraud charges if the federal sentences were "appropriate." Otherwise, the Attorney General stated, the state would prosecute these individuals on its own.
SEC
The SEC has filed settled enforcement actions against five of the six WorldCom executives who have pleaded or been found guilty of securities fraud. To date, however, the SEC has not sued Ebbers. In addition, in 2003, the SEC settled the lawsuit it filed against WorldCom itself. WorldCom agreed to pay $500 million in cash and $250 million worth of stock, all of which will be returned to investors under the Fair Funds provision of the Sarbanes-Oxley Act. To recover a share of this $750 million, investors must file a claim form no later than July 19, 2005. This SEC settlement and claims process are completely separate from the high-profile settlements in the private securities class actions, which are discussed in greater detail below.
Securities Class Action
In May 2004, Citigroup became the first WorldCom defendant to settle when it agreed to pay $2.575 billion. At the time, that settlement by itself made the WorldCom case the second-largest settlement in history behind only the $3.1 billion settlement in 2000 in the Cendant case. As discussed above, the recent flurry of settlements in this case has raised the total settlement fund to an unprecedented $6.061 billion. J.P. Morgan's recent settlement was notable not only for its enormous size (the third-largest settlement in history), but for the way it came about: J.P. Morgan reportedly was offered a settlement in May 2004 for $1.37 billion, but the bank chose to reject that offer. Less than a year later, J.P. Morgan settled the case for $2 billion, or $630 million more. Numerous other settlements in this case, such as Bank of America ($460.5 million), Deutsche Bank Securities ($325 million), and ABN Amro ($278.3 million), are among the top 25 largest settlements of all-time.
Most recently, between March 18 and March 21, all 12 former directors of WorldCom who are defendants in the securities class action settled the claims against them for a combined $60.75 million. Significantly, the directors have agreed to pay $24.75 million out of their own pockets, with the other $36 million coming from insurance proceeds. The directors' settlement is extraordinary because it is one of less than a handful of instances in which directors have agreed to settle using personal funds. The lead plaintiff, the New York State Common Retirement Fund, reportedly insisted from the beginning of the case that such personal payments would be a required part of any potential settlement with the directors.
Following the barrage of recent settlements, the only remaining defendant was WorldCom's auditor, Arthur Andersen. Although Andersen no longer functions as an accounting firm, lawyers for investors decided to take Andersen to trial because they reportedly believe that the firm may still have significant assets. A jury heard opening arguments on March 29. If the case does not settle, the trial against Arthur Andersen may provide the final exclamation point to the WorldCom saga.
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WorldCom Settlement Pie Chart
The following chart plotting the settlements in the WorldCom securities class action appeared in the April 2005 SCAS Alert:
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April 4, 2005 |
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A Tale of Two WorldCom Articles
Jay Kasner and Reid Weingarten, two prominent attorneys with highly-respected law firms, both represented clients in cases related to the WorldCom scandal. Kasner represented J.P. Morgan in the WorldCom securities class action and Weingarten represented Bernie Ebbers in the federal criminal trial against Ebbers. Both clients had less than ideal results--J.P. Morgan settled for $2 billion but reportedly rejected an offer less than a year earlier that would have let it settle for $1.37 billion. Ebbers was convicted of 9 felony counts and faces up to 85 years in prison.
Yet look at the stark contrast in press coverage. On March 24, 2005, Kasner was the subject of a brutal article in the WSJ entitled "J.P. Morgan's $630 Million Error" that questioned his judgment and litigation strategy. Meanwhile, Weingarten was the subject of a lengthy and downright glowing feature article in today's Washington Post Business section that pronounced him a "Washington fixture," a "great lawyer," a "quintessential 'good guy,'" and "Jimmy Stewart with a brain."
I'm not saying that either article is necessarily wrong. I'm just saying.
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April 1, 2005 |
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SCAS Database Free Trial
From time to time we like to offer a free trial of the SCAS Database and email alert service as a thank you to Securities Litigation Watch readers, and we are doing so again now for readers who respond by the end of next week.
The SCAS database is the leading solution for institutions, law firms, insurance companies and anyone else that needs to monitor securities class action litigation. It tracks securities class actions going back over a decade, and can be searched in many powerful ways such as by law firm; court (Circuit, District, State); case status (active, settled, disbursed, dismissed); filing date; settlement date; dismissal date or combinations of any of the above (e.g., all active cases that Milberg Weiss filed in the U.S. District Court for the District of Maryland between February 5, 2000 and March 13, 2002).
The SCAS database also provides real-time email alerts (with 24-hour/day coverage) whenever new cases are filed, cases are settled, or other key events, as well as copies of Complaints, Settlement Notices and Claim Forms.
To request the free trial, kindly send an email to scas@issproxy.com with the word "TRIAL" in the subject line, along with the following contact information:
Name
Organization
Address
Phone
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Tyco Juror Dismissed for Repeated Clumsiness
The AP reports that a juror in the retrial of former Tyco executives Dennis Kozlowski and Mark Swartz was dismissed from the case after she fell in a subway station on the way to the courthouse. Again.
According to the article,
New York State Supreme Court Justice Michael J. Obus dismissed Juror No. 2 about midmorning on Thursday, noting the trial had been going on for some time and a day of testimony had been lost when that same juror previously fell in the snow. The juror later contacted the court and asked to be dismissed, the judge said.
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